Bidders for Winstar Communications' assets, unable to muster up the necessary financing, were given one more week to raise the funds or the company will switch its bankruptcy to a Chapter 7 liquidation.
A court clerk said that, as of late yesterday, no motion had been filed to change to a Chapter 7.
The hearing, set for the U.S. Bankruptcy Court for the District of Delaware, was to go over bids from last week's auction of Winstar assets. According to news reports, the judge ordered the company to find $8 million to keep operating and to avoid cutting service to its customers, who include 30,000 businesses. The company recently announced a contract with the U.S. General Services Administration, its thirteenth government deal. Cutting service would affect such agencies as the U.S. Department of Justice, the Federal Bureau of Investigation and the U.S. Department of Defense, The Wall Street Journal says.
Bidders have until Friday to submit deposits and commitments, and another hearing is scheduled for Monday if bidders produce. Otherwise, Winstar is expected to liquidate.
Late last month, Winstar's Chair and CEO William J. Rouhana Jr., and President and COO Nathan Kantor resigned to place their own bids. Rouhana is the company's founder and Kantor joined Winstar soon after, a spokeswoman said then.
Winstar's attorney did not return phone calls by CEDaily's deadline, nor did its VP of capital market relations or its CFO. A source tells CEDaily no one is left in its media department, and its outside marketing person is no longer involved.
Rouhana bid more than $25 million, but the company was anticipating a bid of more than $100 million in last week's auction, The New York Times reports.
In April, the company filed for Chapter 11 bankruptcy. In July, a bankruptcy court gave final approval to increase availability of Winstar's DIP financing to $225 million, about $175 million of which is "syndicated" to Winstar's bank group. The company also launched an employee retention program at the time.
A month later, Winstar announced it would cut 950 jobs as part of a two-part plan to pull out of bankruptcy. Part two entailed the potential sale of the company.
In August, Winstar announced it was awarded a metropolitan area acquisition contract from the U.S. General Services Administration's federal technology service in San Antonio — the company's thirteenth under the MAA program. The contract, which Winstar shared with SBC Communications, was valued at $239 million.